<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
<TABLE>
<C> <S>
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO____________
</TABLE>
COMMISSION FILE NUMBER 0-28000
---------------------
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
GEORGIA 58-2213805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 WINDY RIDGE PARKWAY 30339-8426
SUITE 100 NORTH (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770)779-3900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Common shares of the registrant outstanding at April 30, 2000 were
49,587,138.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements................................ 1
Condensed Consolidated Statements of Operations for the 1
Three Months Ended March 31, 2000 and 1999.............
Condensed Consolidated Balance Sheets as of March 31, 2000 2
and December 31, 1999..................................
Condensed Consolidated Statements of Cash Flows for the 3
Three Months Ended March 31, 2000 and 1999.............
Notes to Condensed Consolidated Financial Statements...... 4
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations.........................
Item 3. Quantitative and Qualitative Disclosures About 15
Market Risk.........................................
PART II. Other Information
Item 1. Legal Proceedings................................... 16
Item 2. Changes in Securities and Use of Proceeds........... 16
Item 3. Defaults Upon Senior Securities..................... 16
Item 4. Submission of Matters to a Vote of Security 16
Holders.....................................................
Item 5. Other Information................................... 16
Item 6. Exhibits and Reports on Form 8-K.................... 16
Signatures............................................................ 17
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues.................................................... $ 81,829 $ 64,437
Cost of revenues............................................ 45,738 38,038
Selling, general and administrative expenses................ 31,282 22,873
Business acquisition expenses (Note I)...................... -- 1,495
-------- --------
Operating income.......................................... 4,809 2,031
Interest expense, net....................................... (1,550) (1,414)
-------- --------
Earnings before income taxes, minority interest and
cumulative effect of accounting change................. 3,259 617
Income taxes................................................ 1,214 1,386
-------- --------
Earnings (loss) before minority interest and cumulative
effect of accounting change............................ 2,045 (769)
Minority interest in earnings of consolidated
subsidiaries.............................................. -- (77)
-------- --------
Earnings (loss) before cumulative effect of accounting
change................................................. 2,045 (846)
Cumulative effect of accounting change (Note H)............. -- (29,195)
-------- --------
Net earnings (loss)....................................... $ 2,045 $(30,041)
======== ========
Basic earnings (loss) per share (Notes B and E):
Earnings (loss) before cumulative effect of accounting
change................................................. $ 0.04 $ (0.02)
Cumulative effect of accounting change.................... -- (0.63)
-------- --------
Net earnings (loss)....................................... $ 0.04 $ (0.65)
======== ========
Diluted earnings (loss) per share (Notes B and E):
Earnings (loss) before cumulative effect of accounting
change................................................. $ 0.04 $ (0.02)
Cumulative effect of accounting change.................... -- (0.63)
-------- --------
Net earnings (loss)....................................... $ 0.04 $ (0.65)
======== ========
Weighted-average shares outstanding (Notes B and E):
Basic..................................................... 49,433 45,966
======== ========
Diluted................................................... 50,942 45,966
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note D)........................ $ 37,312 $ 39,260
Receivables:
Contract receivables.................................... 70,726 70,038
Employee advances....................................... 9,289 9,035
-------- --------
Total receivables.................................. 80,015 79,073
-------- --------
Funds held for payment of client payables................. 19,485 16,901
Retained interest in receivables sold..................... 3,095 3,304
Prepaid expenses and other current assets................. 6,969 6,039
Deferred income taxes..................................... 5,814 5,814
-------- --------
Total current assets............................... 152,690 150,391
-------- --------
Property and equipment:
Computer and other equipment.............................. 50,746 48,958
Furniture and fixtures.................................... 5,706 5,584
Land and buildings........................................ 1,360 1,412
Leasehold improvements.................................... 6,705 6,016
-------- --------
64,517 61,970
Less accumulated depreciation and amortization............ 30,038 26,652
-------- --------
Property and equipment, net........................ 34,479 35,318
-------- --------
Noncompete agreements, less accumulated amortization........ 1,908 1,711
Deferred loan costs, less accumulated amortization.......... 1,406 1,492
Goodwill, less accumulated amortization..................... 324,562 327,386
Deferred income taxes....................................... 5,414 5,751
Other assets................................................ 1,227 873
-------- --------
$521,686 $522,922
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank...................................... $ 2,335 $ 3,326
Current installments of long-term debt.................... 1,062 1,014
Obligation for client payables............................ 19,485 16,901
Accounts payable and accrued expenses..................... 18,325 17,617
Accrued business acquisition consideration (Note G)....... 2,000 45,000
Accrued payroll and related expenses...................... 31,589 42,049
Deferred tax recovery audit revenue....................... 1,512 1,744
-------- --------
Total current liabilities.......................... 76,308 127,651
Long-term debt, excluding current installments.............. 143,297 95,294
Deferred compensation....................................... 4,963 4,656
Other long-term liabilities................................. 1,944 2,821
-------- --------
Total liabilities.................................. 226,512 230,422
-------- --------
Shareholders' equity (Note E):
Preferred stock, no par value. Authorized and unissued
1,000,000 shares........................................ -- --
Common stock, no par value; stated value $.001 per share.
Authorized 200,000,000 shares; issued and outstanding
49,565,638 shares at March 31, 2000 and 49,363,044
shares at December 31, 1999............................ 49 49
Additional paid-in capital................................ 306,334 302,455
Retained earnings (accumulated deficit)................... 1,138 (907)
Accumulated other comprehensive loss...................... (12,347) (9,097)
-------- --------
Total shareholders' equity......................... 295,174 292,500
-------- --------
Commitments and contingencies (Note G)
$521,686 $522,922
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)....................................... $ 2,045 $(30,041)
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Cumulative effect of accounting change.................. -- 29,195
Depreciation and amortization........................... 7,428 5,524
Minority interest in earnings of consolidated
subsidiaries........................................... -- 77
Interest accrued on shareholder loans................... -- 334
Deferred compensation................................... 306 189
Deferred income taxes................................... 337 (606)
Foreign translation adjustments......................... 28 --
Changes in assets and liabilities, net of effects of
acquisitions:
Receivables........................................... (485) 892
Prepaid expenses and other current assets............. (721) 896
Other assets.......................................... (623) (510)
Accounts payable and accrued expenses................. 557 (5,113)
Accrued payroll and related expenses.................. (10,460) (4,710)
Deferred tax recovery audit revenue................... (232) (59)
Other long-term liabilities........................... (877) (559)
-------- --------
Net cash used in operating activities.............. (2,697) (4,491)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment....................... (2,525) (5,193)
Acquisitions of businesses (net of cash acquired) (Note
G)...................................................... (46,925) (30,477)
-------- --------
Net cash used in investing activities.............. (49,450) (35,670)
-------- --------
Cash flows from financing activities:
Net decrease in note payable to bank...................... (991) (1,707)
Proceeds from issuance of long-term debt.................. 48,051 41,933
Repayments of long-term debt.............................. -- (96,526)
Proceeds from shareholder loans........................... -- 1,479
Net proceeds from issuance of common stock................ 3,139 95,023
-------- --------
Net cash provided by financing activities.......... 50,199 40,202
-------- --------
Net change in cash and cash equivalents............ (1,948) 41
Cash and cash equivalents at beginning of period............ 39,260 30,266
-------- --------
Cash and cash equivalents at end of period.................. $ 37,312 $ 30,307
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest.................. $ 1,515 $ 1,056
======== ========
Cash paid during the period for income taxes.............. $ 3,301 $ 631
======== ========
Supplemental disclosure of noncash investing and financing
activities:
During the three months ended March 31, 2000, the Company
purchased the net operating assets of certain companies
and made payments for further purchase consideration
related to two previously acquired companies. In
conjunction with the acquisitions, the Company assumed
liabilities as follows:
Fair value of assets acquired......................... $ 47,802 $ --
Cash paid for the acquisitions (net of cash
acquired)............................................ (46,925) --
Fair value of shares issued for the acquisitions...... (725) --
-------- --------
Liabilities assumed................................ $ 152 $ --
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
The Profit Recovery Group International, Inc. and its wholly owned subsidiaries
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. For further
information, refer to the Consolidated Financial Statements and Footnotes
thereto included in the Company's Form 10-K for the year ended December 31,
1999.
As indicated in Note H, the Company made the decision in the second quarter
of 1999 to recognize revenue when it invoices clients for its fee, retroactive
to January 1, 1999. In accordance with the applicable requirements of generally
accepted accounting principles, financial statements for periods prior to 1999
have not been restated.
During August 1999, the Company acquired Meridian VAT Corporation Limited
("Meridian") and PRS International, Ltd. ("PRS"). Both of these acquisitions
have been accounted for as poolings-of-interests. Accordingly, the accompanying
Condensed Consolidated Financial Statements have been retroactively restated, as
required under generally accepted accounting principles, to include the
operations of Meridian and PRS.
On July 20, 1999, the Company declared a 3-for-2 stock split effected in
the form of a stock dividend for shareholders of record on August 2, 1999,
payable on August 17, 1999. All share and per share amounts have been
retroactively restated to give effect to the aforementioned stock split.
Certain reclassifications have been made to the 1999 amounts to conform to
the presentation in 2000.
NOTE B -- EARNINGS PER SHARE
The following table sets forth the computations of basic and diluted
earnings (loss) per share for the three month periods ended March 31, 2000 and
1999 (in thousands, except for earnings (loss) per share information):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------- --------
<S> <C> <C>
Numerator for both basic earnings (loss) per share and
diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of accounting
change................................................. $ 2,045 $ (846)
Cumulative effect of accounting change.................... -- (29,195)
------- --------
Net earnings (loss)............................... $ 2,045 $(30,041)
======= ========
Denominator:
Denominator for basic earnings (loss) per
share -- weighted-average shares outstanding........... 49,433 45,966
Effect of dilutive securities............................. 1,509 --
------- --------
Denominator for diluted earnings (loss) per share......... 50,942 45,966
======= ========
</TABLE>
4
<PAGE> 7
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
------- --------
<S> <C> <C>
Basic earnings (loss) per share:
Earnings (loss) before cumulative effect of accounting
change................................................. $ 0.04 $ (0.02)
Cumulative effect of accounting change.................... -- (0.63)
------- --------
Net earnings (loss)............................... $ 0.04 $ (0.65)
======= ========
Diluted earnings (loss) per share:
Earnings (loss) before cumulative effect of accounting
change................................................. $ 0.04 $ (0.02)
Cumulative effect of accounting change.................... -- (0.63)
------- --------
Net earnings (loss)............................... $ 0.04 $ (0.65)
======= ========
</TABLE>
NOTE C -- COMPREHENSIVE INCOME (LOSS)
The Company applies the provisions of SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes items that are required to be
recognized under accounting standards as components of comprehensive income.
SFAS No. 130 requires, among other things, that an enterprise report a total for
comprehensive income in condensed financial statements of interim periods issued
to shareholders. For the three month periods ended March 31, 2000 and 1999, the
Company's consolidated comprehensive loss was $(1.2) million and $(32.5)
million, respectively. The difference between consolidated comprehensive loss,
as disclosed here, and traditionally-determined consolidated net earnings
(loss), as set forth on the accompanying Condensed Consolidated Statements of
Operations, results from foreign currency translation adjustments.
NOTE D -- CASH EQUIVALENTS
Cash equivalents at December 31, 1999 included $5.1 million of temporary
investments held at a French bank by certain of the Company's French
subsidiaries. Additionally, as of March 31, 2000, the Company's UK and Canadian
subsidiaries held cash equivalents of approximately $1.4 million each in
temporary investments with local banks.
From time to time, the Company invests excess cash in reverse repurchase
agreements with Bank of America, which are fully collateralized by United States
of America Treasury Notes in the possession of such bank. The Company does not
intend to take possession of collateral securities on future reverse repurchase
agreement transactions conducted with banking institutions of national standing.
The Company does insist, however, that all such agreements provide for full
collateralization using obligations of the United States of America having a
current market value equivalent of up to or exceeding the reverse repurchase
agreement amount. No such reverse purchase agreements were outstanding at March
31, 2000, or December 31, 1999.
NOTE E -- SHAREHOLDERS' EQUITY
On July 20, 1999, the Company declared a 3-for-2 stock split effected in
the form of a stock dividend for shareholders of record on August 2, 1999,
payable on August 17, 1999. All share and per share amounts have been
retroactively restated to give effect to the aforementioned stock split.
On January 8, 1999, the Company sold 4.1 million newly issued shares of its
common stock and certain selling shareholders sold an additional 1.2 million
outstanding shares in an underwritten follow-on offering. The offering was
priced at $22.67 per share. The proceeds of the offering (net of underwriting
discounts and commissions) were distributed by the underwriting syndicate on
January 13, 1999. The net proceeds from the 4.1 million shares sold by the
Company, combined with the net proceeds from an additional 286,500 shares
subsequently sold by the Company in late January 1999 upon exercise by the
underwriting syndicate of their over-allotment option, were applied to reduce
outstanding borrowings under the Company's $200.0 million
5
<PAGE> 8
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
bank credit facility. Additionally, 501,000 shares were sold in late January
1999 by certain selling shareholders in connection with the over-allotment
option. The Company received no proceeds from the sale of such shares.
Although the Company has issued no preferred stock through March 31, 2000,
and has no present intentions to issue any preferred stock, such stock may be
issued at any time or from time to time in one or more series with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions (including dividend, conversion and voting rights) as may be
determined by the Company's Board of Directors, without any further votes or
action by the shareholders.
NOTE F -- OPERATING SEGMENTS AND RELATED INFORMATION
The Company applies the provisions of SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which specifies the
methodology by which the Company reports information about its operating
segments and requires limited interim period reporting.
The Company has four reportable operating segments consisting of Accounts
Payable Services, Freight Services, Taxation Services and Facilities Services.
Each segment represents a strategic business unit that offers a different type
of recovery audit service. These business units are managed separately because
each business requires different technology and marketing strategies.
Accounts Payable Services consist of the review of client accounts payable
disbursements to identify and recover overpayments. This operating segment
includes accounts payable services provided to retailers, wholesale distributors
and governmental agencies (the Company's historical client base) and accounts
payable services provided to various other types of business entities by the
Company's Commercial Division. The Accounts Payable Services operating segment
conducts business in North America, South America, Europe, Australia, Africa and
Asia.
Freight Services consist primarily of various businesses acquired by the
Company since 1997, which audit freight-related disbursements to identify and
recover overpayments. Areas of current specialization include ocean freight,
truck freight, rail freight and overnight freight. This operating segment serves
primarily businesses located in the United States.
Taxation Services consist primarily of various European businesses acquired
by the Company since 1997 which audit tax-related disbursements to identify and
recover overpayments (primarily within France), obtain refunds of European value
added taxes ("VAT") for clients located in many parts of the world, and assist
business entities throughout Europe in securing available grants.
Facilities Services consist primarily of various businesses acquired by the
Company since 1999, which provide telecommunications auditing, custom
application development, and advisory services. Areas of current specialization
for advisory services include projects requiring secure Internet-based
transaction processing and facilities management. This operating segment serves
primarily businesses located in the United States.
The Company evaluates the performance of its operating segments based upon
revenues and operating income. Intersegment revenues are not significant.
6
<PAGE> 9
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Segment information for the quarters ended March 31, 2000 and 1999 follows
(in thousands):
<TABLE>
<CAPTION>
ACCOUNTS
PAYABLE FREIGHT TAXATION FACILITIES
SERVICES SERVICES SERVICES SERVICES TOTAL
-------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Three months ended March 31, 2000
Revenues........................................ $59,086 $6,160 $13,325 $3,258 $81,829
Operating income (loss)......................... 5,733 726 (1,182) (468) 4,809
Three months ended March 31, 1999
Revenues........................................ $51,171 $3,765 $ 9,250 $ 251 $64,437
Operating income (loss)......................... 3,185 1,900 (3,196) 142 2,031
</TABLE>
NOTE G -- ACQUISITIONS
On August 6, 1998, the Company acquired substantially all the assets and
assumed certain liabilities of Loder Drew & Associates, Inc. ("Loder Drew") a
California-based international recovery auditing firm primarily serving clients
in the manufacturing, financial services and other non-retail sectors. The
transaction was accounted for as a purchase with initial consideration of $70.0
million in cash and 1.2 million restricted, unregistered shares of the Company's
common stock valued at $11.05 per share. Additionally, the prior owners of Loder
Drew received further purchase price consideration in March 1999 of $30.0
million in cash based on the financial performance of Loder Drew for the six
month period ended December 31, 1998, and received purchase price consideration
of $40.0 million in cash in the first quarter of 2000 based on the financial
performance of Loder Drew for the year ending December 31, 1999. This
acquisition resulted in goodwill of $153.6 million, which is being amortized
over 25 years using the straight-line method.
On April 1, 1999, the Company acquired substantially all the assets and
assumed certain liabilities of Payment Technologies, Inc. d/b/a PayTech
("PayTech"), a Georgia-based firm in the business of handling freight data,
auditing freight bills and other related services. The transaction was accounted
for as a purchase, with consideration of $4.9 million in cash and 228,798
restricted, unregistered shares of the Company's common stock valued at $15.37
per share. The acquisition resulted in goodwill of $8.5 million, which is being
amortized over 25 years using the straight-line method.
On June 14, 1999, the Company acquired the net assets of Invoice and Tariff
Management Group, LLC ("ITMG"), a Georgia-based firm in the business of
telecommunications recovery auditing and negotiating integrated services
contracts with its clients' telecom suppliers on a gain-share basis. The
transaction was accounted for as a purchase and involved initial consideration
of $10.9 million in cash and 353,310 restricted, unregistered shares of the
Company's common stock valued at $17.83 per share. The former owners of ITMG are
also entitled to receive additional purchase price consideration of $5.0 million
in cash, (of which $3.0 million has been paid) based upon the financial
performance of ITMG for the period from acquisition date through December 31,
1999, and are eligible to receive further purchase price consideration of $15.0
million in cash conditioned on the future financial performance of ITMG for the
year ending December 31, 2000. This acquisition resulted in goodwill of $23.0
million, which is being amortized over 30 years using the straight-line method.
On August 19, 1999, the Company acquired Meridian VAT Corporation Limited
("Meridian"). Meridian is based in Dublin, Ireland and specializes in the
recovery of value-added taxes paid on business expenses by corporate clients.
The transaction was accounted for as a pooling-of-interests with consideration
of 6,114,375 unregistered shares of the Company's common stock.
On August 31, 1999, the Company acquired substantially all the assets and
assumed substantially all the liabilities of PRS International, Ltd. ("PRS").
PRS is a Texas-based recovery audit firm servicing primarily middle-market
clients in a variety of industrial and commercial sectors. The transaction was
accounted for as a pooling-of-interests with consideration of 1,113,043
unregistered shares of the Company's common stock.
7
<PAGE> 10
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated financial statements for periods prior to the acquisitions
of Meridian and PRS have been restated to include the accounts and results of
operations of Meridian and PRS. The results of operations previously reported by
the separate enterprises and the combined amounts included in the accompanying
condensed consolidated financial statements for the three months ended March 31,
1999 are summarized below:
<TABLE>
<CAPTION>
NET EARNINGS
REVENUES (LOSS)
-------- ------------
<S> <C> <C>
The Profit Recovery Group International, Inc................ $56,615 $(27,084)
Meridian VAT Corporation Limited............................ 3,277 (3,907)
PRS International, Ltd...................................... 4,545 950
------- --------
Combined.......................................... $64,437 $(30,041)
======= ========
</TABLE>
On October 14, 1999, the Company signed a definitive agreement with certain
private shareholders to acquire approximately 89% of the total outstanding
shares of AP SA and its subsidiaries (collectively, "Groupe AP"), a tax recovery
audit firm which operates primarily within France. At the time the definitive
agreement was signed, Groupe AP was publicly traded on the French
over-the-counter market with approximately 11% of its total outstanding shares
publicly held. The Company initiated a cash tender for all publicly-traded
shares of Groupe AP in November 1999 and substantially all of the publicly-held
shares were subsequently tendered as of December 31, 1999. Acquisition of the
89% portion of Groupe AP shares held by private shareholders was closed on
November 15, 1999. The acquisition of Groupe AP was accounted for as a purchase
with aggregate initial consideration paid to public and private shareholders
combined of $18.6 million in cash and 356,718 restricted, unregistered shares of
the Company's common stock valued at $23.91 per share. In addition to the
initial consideration received by the private shareholders of Groupe AP, these
shareholders will also be eligible to receive additional purchase price
consideration based upon the profitability of Groupe AP for the two year period
ending December 31, 2000 of up to 89.0 million French Francs (approximately
$13.0 million at March 31, 2000) payable no later than April 30, 2001 using a
prescribed combination of cash and restricted, unregistered shares of the
Company's common stock. The acquisition resulted in goodwill of $29.1 million,
which is being amortized over 20 years using the straight-line method.
On December 3, 1999, the Company acquired all outstanding shares of Freight
Rate Services, Inc. ("FRS"), a freight auditing and consulting firm based in
Missouri. The transaction was accounted for as a purchase, with consideration of
$1.3 million in cash and 60,223 restricted, unregistered shares of the Company's
common stock valued at $21.47 per share. The acquisition resulted in goodwill of
$2.7 million, which is being amortized over 25 years using the straight-line
method.
On December 16, 1999, the Company acquired substantially all net assets of
Integrated Systems Consultants, Inc. ("ISC"), a custom application development,
consulting and system integration firm located in Atlanta, Georgia. The
transaction was accounted for as a purchase, with consideration of $3.0 million
in cash and 77,569 restricted, unregistered shares of the Company's common stock
valued at $20.37 per share. The acquisition resulted in goodwill of $4.2
million, which is being amortized over 20 years using the straight-line method.
On December 28, 1999, the Company acquired the 49% minority ownership
interests in two Meridian operating subsidiaries which were not acquired by the
Company as part of the Meridian pooling-of-interests acquisition in August 1999.
The transaction was accounted for as a purchase, with consideration of $6.0
million in cash and 158,178 restricted, unregistered shares of the Company's
common stock valued at $12.74 per share. The acquisition resulted in goodwill of
$8.8 million, which is being amortized over 20 years using the straight-line
method.
On March 23, 2000, the Company acquired substantially all the assets and
assumed certain liabilities of The Right Answer, Inc., a Georgia Corporation.
The transaction was accounted for as a purchase, with
8
<PAGE> 11
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consideration of $3.9 million in cash and 54,379 restricted, unregistered shares
of the Company's common stock valued at $13.33 per share. The acquisition
resulted in goodwill of $4.4 million, which is being amortized over 20 years
using the straight-line method.
NOTE H -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Due to the Company's continuing and substantial expansion beyond its
historical client base and original service offerings, as well as the
administrative desirability of standardizing revenue recognition practices, the
Company made the decision at the conclusion of the second quarter of 1999 to
recognize revenue on all of its then existing operations when it invoices
clients for its fee. Generally accepted accounting principles required that this
change be implemented retroactively to January 1, 1999. The Company had
previously recognized revenue from services provided to its historical client
base (consisting of retailers, wholesale distributors and governmental agencies)
at the time overpayment claims were presented to and approved by its clients. In
effecting this change, the Company reported, as of January 1, 1999, a non-cash,
after-tax charge of $29.2 million as the cumulative effect of a change in an
accounting principle. The cumulative effect of the accounting change was derived
as follows (in thousands):
<TABLE>
<S> <C>
Unbilled contract receivables at December 31, 1998, as
adjusted.................................................. $ 69,432
Less: auditor payroll accrual at December 31, 1998,
associated with unbilled contract receivables............. (21,564)
--------
Subtotal.................................................... 47,868
Less: related income tax effect at 39.0%.................... (18,673)
--------
Cumulative effect of accounting change...................... $ 29,195
========
</TABLE>
During years ended December 31, 1998 and prior, the Company recognized
revenues on services provided to its historical client base at the time
overpayment claims were presented to and approved by its clients, as adjusted
for estimated uncollectible claims. Estimated uncollectible claims were
initially established, and subsequently adjusted, for each individual client
based upon historical collection rates, types of claims identified, current
industry conditions, and other factors which, in the opinion of management,
deserved recognition. Under this submitted claims basis of revenue recognition,
as applied to the Company's historical client base, the Company recorded
revenues at estimated net realizable value without reserves. Accordingly,
adjustments to uncollectible claim estimates were directly charged or credited
to earnings, as appropriate.
The Company's Revenue Recognition Policy has been revised, effective
January 1, 1999, as follows:
The Company's revenues are based on specific contracts with its clients.
Such contracts generally specify (a) time periods covered by the audit, (b)
nature and extent of audit service to be provided by the Company, (c) client's
duties in assisting and cooperating with the Company, and (d) fees payable to
the Company generally expressed as a specified percentage of the amounts
recovered by the client resulting from liability overpayment claims identified.
In the case of prospective facilities audits such as telecommunications tariff
negotiations conducted by the Company on behalf of its clients, contracts
typically provide for a percentage-of-savings fee which is calculated and fixed
at the time the new tariff agreement is executed, and is payable to the Company
on a current basis.
In addition to contractual provisions, most clients also establish specific
procedural guidelines which the Company must satisfy prior to submitting claims
for client approval. These guidelines are unique to each client and impose
specific requirements on the Company such as adherence to vendor interaction
protocols, provision of advance written notification to vendors of forthcoming
claims, securing written claim validity concurrence from designated client
personnel and, in limited cases, securing written claim validity concurrence
from the involved vendors. Approved claims are processed by clients and
generally taken as credits
9
<PAGE> 12
THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
against outstanding payables or future purchases from the vendors involved. The
Company then invoices its clients for a contractually stipulated percentage of
amounts recovered.
Invoice basis of revenue recognition
For all recovery audit operations, except those that secure refunds from
governmental entities under narrowly defined circumstances, the Company
recognizes revenues when it invoices clients for its fee.
Submitted claims basis of revenue recognition
With respect to the Company's present and future operations to secure
refunds pursuant to statute or regulation of amounts paid by clients to
governmental entities, the Company recognizes revenues at the time refund claims
containing all required documentation are filed with appropriate governmental
agencies in those instances where historical refund disallowance rates can be
accurately estimated. The Company records its fee participation in these refunds
at estimated net realizable value without reserves. Accordingly, adjustments to
uncollectible fee estimates are charged or credited to earnings, as appropriate.
As of March 31, 2000, the only unit of the Company utilizing the submitted
claims method of revenue recognition was Meridian.
NOTE I -- BUSINESS ACQUISITION EXPENSE
Business acquisition expenses of $1,495 (in thousands) for the three months
ended March 31, 1999 consisted of expenses incurred by Meridian with respect to
its phantom stock plan.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto included
elsewhere herein.
OVERVIEW
The Company is a leading provider of accounts payable and other recovery
audit services to large and mid-size businesses and certain governmental
agencies having numerous payment transactions with many vendors. These
businesses include but are not limited to retailers, manufacturers, wholesale
distributors, technology companies and healthcare providers.
In businesses with large purchase volumes and continuously fluctuating
prices, some small percentage of erroneous overpayments to vendors is
inevitable. In addition, the complexity of various tax laws results in
overpayments to governmental agencies. Services such as freight and
telecommunications provided to businesses under complex pricing arrangements
also can result in overpayments. All of these overpayments result in "lost
profits". The Company's trained, experienced audit specialists use sophisticated
proprietary technology and advanced audit techniques and methodologies to
identify overpayments to vendors and tax authorities. The Company receives a
contractual percentage of overpayments it identifies and its clients recover.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain items in the Company's Condensed Consolidated Financial Statements of
Operations for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------
2000 1999
----- -----
<S> <C> <C>
Revenues.................................................... 100.0% 100.0%
Cost of revenues............................................ 55.9 59.0
Selling, general and administrative expenses................ 38.2 35.5
Business acquisition expenses............................... -- 2.3
----- -----
Operating income.......................................... 5.9 3.2
Interest expense, net....................................... (1.9) (2.2)
----- -----
Earnings before income taxes, minority interest and
cumulative effect of accounting change................. 4.0 1.0
Income taxes................................................ 1.5 2.2
----- -----
Earnings (loss) before minority interest and cumulative
effect of accounting change............................ 2.5 (1.2)
Minority interest in earnings of consolidated
subsidiaries.............................................. -- (0.1)
----- -----
Earnings (loss) before cumulative effect of accounting
change................................................. 2.5 (1.3)
Cumulative effect of accounting change...................... -- (45.3)
----- -----
Net earnings (loss)....................................... 2.5% (46.6)%
===== =====
</TABLE>
11
<PAGE> 14
Three Month Period Ended March 31, 2000 Compared to Corresponding Period of the
Prior Year
Revenues. The Company's revenues consist principally of contractual
percentages of overpayments recovered for clients. The Company's services and
operations are currently grouped into four distinct operating segments: Accounts
Payable; Freight; Taxation; and Facilities (see Note F to Condensed Consolidated
Financial Statements). Revenues increased 27.0% to $81.8 million for the first
quarter of 2000, up from $64.4 million in the first quarter of 1999.
Domestic revenues were $55.0 million in the first quarter of 2000, up 16.3%
from $47.3 million in the first quarter of 1999. This increase was due to an
expanding new client base, growth through acquisitions and increased sales to
existing clients.
International revenues were $26.8 million in the first quarter of 2000, up
56.7% from $17.1 million in the first quarter of 1999. Most of this increase
related to the Company's European operations.
The Company has experienced and expects to continue to experience
significant seasonality in its business. The Company typically realizes higher
revenues and operating income in the last two quarters of its fiscal year.
Recent business acquisitions are not expected to affect this trend.
Cost of Revenues. Cost of revenues consists principally of commissions
paid or payable to the Company's auditors based primarily upon the level of
overpayment recoveries, and compensation paid to various types of hourly workers
and salaried operational managers. Also, included in cost of revenues are other
direct costs incurred by these personnel including rental of non-headquarters
offices, travel and entertainment, telephone, utilities, maintenance and
supplies, and clerical assistance. Cost of revenues was 55.9% of revenues for
the first quarter of 2000, down from 59.0% in the comparable quarter of 1999.
Domestically, cost of revenues as a percentage of revenues was 54.3% in the
first quarter of 2000, up from 53.6% during the corresponding quarter of 1999.
Internationally, cost of revenues as a percentage of revenues decreased to 59.1%
in 2000, down from 74.2% in 1999. The 2000 improvements worldwide related
principally to auditor compensation programs being migrated from a fixed rate
salary structure to a variable rate commission plan which is based upon the
level of sales activity and the impact of operational improvements in the
Meridian VAT division.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses include the expenses of sales and marketing activities,
information technology services and the corporate data center, human resources,
legal and accounting, administration, headquarters-related depreciation of
property and equipment and amortization of intangibles. Selling, general and
administrative expenses as a percentage of revenues increased to 38.2% in the
first quarter of 2000, up from 35.5% in the comparable period of 1999. The year
over year increase in selling, general and administrative expense as a
percentage of revenue is primarily due to the negative effect of the French tax
worker's strike upon the Company's Taxation Services first quarter 2000 revenue
and a slightly increased level of reserves for accounts receivable.
Operating Income. Operating income increased 136.8% to $4.8 million in the
first quarter of 2000, up from $2.0 million in the first quarter of 1999. As a
percentage of revenues, operating income increased to 5.9% in the first quarter
of 2000, up from 3.2% in the first quarter of 1999. The most significant factor
impacting operating income as a percentage of revenues was the business
acquisition expense related to Meridian VAT Corporation Limited. This expense
totaled 2.3% of revenues in the first quarter of 1999. Other components of the
change have been discussed above.
Interest Expense, Net. The Company incurred net interest expense of
approximately $1.6 million in the first quarter of 2000, up slightly from net
interest expense of $1.4 million in the first quarter of 1999. Most of the
Company's interest expense pertains to its $200.0 million senior credit facility
with a banking syndicate. The year over year increase in interest expense is
primarily due to increased borrowing levels resulting from the cumulative impact
of the acquisitions completed since the first quarter of 1999.
The Company makes periodic borrowings under its credit facility primarily
to finance the cash portion of consideration paid for businesses it acquires.
Without these acquisitions, the Company's need for bank borrowings would be
minimal.
12
<PAGE> 15
Earnings (Loss) Before Income Taxes, Minority Interest and Cumulative
Effect of Accounting Change. Earnings before income taxes, minority interest and
cumulative effect of accounting change rose 428.2% in the quarter ended March
31, 2000, compared to the first quarter of 1999. This improvement resulted from
increased revenues and an improved operating margin during the 2000 period, and
nonrecurring business acquisition costs incurred in the first quarter of 1999.
Income Taxes. The provisions for income taxes for all periods presented
consist of federal, state and foreign income taxes at a composite effective
rate, which was approximately 37.25% in first quarter of 2000. Rates for the
first quarter of 1999 are more than 100% as a result of nondeductible business
acquisition costs in pooling-of-interest transactions.
Minority Interest in Earnings of Consolidated Subsidiaries. Minority
interest in earnings of consolidated subsidiaries relates to the 49% minority
ownership interests in two Meridian operating subsidiaries that were not
acquired by the Company as part of the Meridian pooling-of-interests acquisition
in August 1999. These minority interests were subsequently acquired by the
Company in December 1999.
Cumulative Effect of Accounting Change. As more fully described in Note H
to this Form 10-Q, the Company has chosen to change its method of accounting for
certain aspects of its revenue recognition retroactive to January 1, 1999. In
effecting this change, the Company has reported, as of January 1, 1999, a
non-cash, after-tax charge of $29.2 million as the cumulative effect of a change
in accounting principle.
Weighted-Average Shares Outstanding -- Basic. The Company's
weighted-average shares outstanding for purposes of calculating basic earnings
per share increased to 49.4 million during the first quarter of 2000, up 3.4
million shares from 46.0 million during the first quarter of 1999. This increase
was comprised primarily of (i) unregistered shares issued by the Company in
liquidation of Meridian's shareholder loans and (ii) restricted, unregistered
shares issued by the Company in connection with acquisitions of various
companies.
LIQUIDITY AND CAPITAL RESOURCES
On July 29, 1998, the Company replaced its existing $30.0 million senior
bank credit facility with a five-year, $150.0 million senior bank credit
facility. Subject to adherence to standard loan covenants, borrowings under the
new credit facility are available for working capital, acquisitions of other
companies in the recovery audit industry, capital expenditures and general
corporate purposes. The Company transferred $5.4 million in outstanding
borrowings to the new credit facility on July 29, 1998. On September 18, 1998,
the Company increased its credit facility from $150.0 million to $200.0 million
and the facility was syndicated between ten banking institutions led by Bank of
America (formerly NationsBank, N.A). as agent for the group. In January 1999,
the Company completed a public offering of its common stock. This offering
provided net proceeds to the Company of $92.8 million, all of which were used to
repay credit facility borrowings. As of March 31, 2000, the Company had
outstanding principal borrowings of $141.1 million under this $200.0 million
credit facility.
Net cash used in operating activities was $2.7 million in the first three
months of 2000 contrasted with net cash used in operating activities of $4.5
million during the corresponding period of 1999. The improvement results
primarily from an increase in the sum of net earnings (loss) plus non-cash
operating expenses, which is partially offset by a decrease in accrued payroll
and related expenses, when compared to the same amounts in the earlier period.
Net cash used in investing activities was $49.5 million during the first
three months of 2000, up from $35.7 million during the corresponding period of
1999. The increase related primarily to higher amounts of additional purchase
price consideration (earnout) paid to the former owners of two acquired
businesses.
Net cash provided by financing activities was $50.2 million during the
first three months of 2000 and $40.2 million during the first three months of
1999. The net cash provided by financing activities during each of the two
periods related primarily to proceeds from the Company's $200.0 million credit
facility which were used to fund business acquisitions. Proceeds from a
follow-on common stock offering in the first quarter of 1999 were used to
temporarily reduce the amount outstanding under the credit facility. As of
December 31,
13
<PAGE> 16
1999, the Company recorded $45.0 million as accrued business acquisition
consideration on its Consolidated Balance Sheet in connection with two acquired
recovery audit firms. The Company borrowed $43.0 million under its credit
facility in March 2000 and simultaneously paid this amount to the prior owners
of ITMG and Loder Drew. The remaining consideration due to the prior owners is
scheduled to be paid in 2000 and 2001. Although it is anticipated that these
amounts will be paid, payment is conditional upon the achievement of certain
future financial performance targets. The Company will fund these remaining
contingent payouts, if any, through additional borrowing under the Company's
credit facility.
The Company expects to pay $3.5 million to the former participants in the
Meridian phantom stock plan by periodic payments through January 2001. These
payments are expected to be funded with cash generated from the sale of certain
Meridian receivables.
The former owners of ITMG are eligible to receive further purchase price
consideration of $15.0 million in cash conditioned on the future financial
performance of ITMG for the year ending December 31, 2000. Additionally, the
private shareholders of Groupe AP are eligible to receive additional purchase
price consideration based upon the profitability of Groupe AP for the two year
period ending December 31, 2000 of up to 89.0 million French Francs
(approximately $13.0 million at March 31, 2000) payable no later than April 30,
2001 using a prescribed combination of cash and restricted, unregistered shares
of the Company's common stock.
The Company from time to time issues restricted, unregistered common stock
in partial consideration for the business entities it acquires. The timing and
quantity of any future securities issuances are not susceptible to estimation.
Additionally, if the Company is successful in arranging for future acquisitions,
which individually or collectively are large relative to the Company's size, it
may need to secure additional debt or equity financing. There are no current
plans to seek such financing.
The Company believes that its current working capital, availability
remaining under its $200.0 million credit facility and cash flow generated from
future operations will be sufficient to meet the Company's working capital and
capital expenditure requirements through December 31, 2000 unless one or more
acquisitions are consummated which require the Company to seek additional debt
or equity financing.
NEW ACCOUNTING STANDARD
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
pronouncement, as amended by Statement of Financial Accounting Standards No.
137, is effective for all fiscal quarters of fiscal years beginning after June
15, 2000 although earlier applications is encouraged. The Company has chosen to
adopt this pronouncement effective with its fiscal year, which begins January 1,
2001 and does not believe that it will materially affect its reported results of
operations, or financial condition upon adoption.
FORWARD-LOOKING STATEMENTS
Statements made in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this Form 10-Q which look
forward in time, including without limitation, (1) the Company's assessment of
its obligation to pay contingent consideration to the former equity holders of
ITMG and Groupe AP, (2) statements that contain projections of the Company's
future results of operations or of the Company's financial condition and (3)
statements regarding the adequacy of the Company's current working capital and
other available sources of funds, involve risks and uncertainties and are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such risks and uncertainties include the
following:
- future performance of the Company's ITMG and Groupe AP divisions;
- unanticipated capital expenditures;
- the ability of the Company to successfully implement its operating
strategy and acquisition strategy;
- the Company's ability to manage rapid expansion, including, without
limitation, the assimilation of acquired companies;
14
<PAGE> 17
- changes in economic cycles;
- competition from other companies;
- changes in laws and governmental regulations applicable to the Company;
and
- other risk factors detailed in the Company's Form 10-K for the year ended
December 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has not conducted transactions, established commitments or
entered into relationships requiring disclosures beyond those provided elsewhere
in this Form 10-Q.
15
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 22, 2000, in connection with the acquisition of The Right Answer
Inc. (the "Right Answer"), the Company issued 54,379 restricted, unregistered
shares of the Company's common stock to the former owners of Right Answer. The
shares were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C> <C>
3.1 -- Restated Articles of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the
Registrant's Form 10-K for the year ended December 31,
1999).
3.2 -- Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Registrant's March 26, 1996 registration
statement number 333-1086 on Form S-1).
4.1 -- Specimen Common Stock Certificate (incorporated by reference
to Exhibit 4.1 to Registrant's March 16, 1998 registration
statement number 333-46225 of Form S-3).
27.1 -- Financial Data Schedule for three months ended March 31,
2000 (for SEC use only).
27.2 -- Financial Data Schedule for three months ended March 31,
1999, as restated for poolings-of- interest and common stock
split effected in the form of a stock dividend (for SEC use
only).
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended March 31, 2000.
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.
Dated: May 12, 2000 By: /s/ SCOTT L. COLABUONO
--------------------------------------------
Scott L. Colabuono
Executive Vice President -- Finance,
Treasurer and Chief Financial Officer
(Principal Financial Officer)
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. FOR THE
QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 37,312
<SECURITIES> 0
<RECEIVABLES> 80,015
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 152,690
<PP&E> 34,479
<DEPRECIATION> 30,038
<TOTAL-ASSETS> 521,686
<CURRENT-LIABILITIES> 76,308
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 295,125
<TOTAL-LIABILITY-AND-EQUITY> 521,686
<SALES> 0
<TOTAL-REVENUES> 81,829
<CGS> 0
<TOTAL-COSTS> 45,738
<OTHER-EXPENSES> 31,282
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,550
<INCOME-PRETAX> 3,259
<INCOME-TAX> 1,214
<INCOME-CONTINUING> 2,045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,045
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. FOR THE
QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 30,307
<SECURITIES> 0
<RECEIVABLES> 48,171
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 88,699
<PP&E> 27,239
<DEPRECIATION> 18,899
<TOTAL-ASSETS> 346,186
<CURRENT-LIABILITIES> 47,114
<BONDS> 87,851
0
0
<COMMON> 42
<OTHER-SE> 205,369
<TOTAL-LIABILITY-AND-EQUITY> 346,186
<SALES> 0
<TOTAL-REVENUES> 64,437
<CGS> 0
<TOTAL-COSTS> 38,038
<OTHER-EXPENSES> 24,368
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,414
<INCOME-PRETAX> 617
<INCOME-TAX> 1,386
<INCOME-CONTINUING> (846)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (29,195)
<NET-INCOME> (30,041)
<EPS-BASIC> (0.65)
<EPS-DILUTED> (0.65)
</TABLE>
